Bangladesh faces economic strain due to a new 37 percent reciprocal tariff on exports to the US, part of Trump’s extensive trade policy overhaul. The garment industry, vital to Bangladesh’s economy, is especially vulnerable. Experts emphasize the need for strategic policymaking to adapt to these changes, as the global trading framework becomes increasingly fragmented. Numerous countries, including China and Vietnam, also face significant tariff increases, complicating international trade dynamics.

Bangladesh is poised to experience renewed economic challenges as its exports to the United States become subject to a 37 percent “reciprocal tariff” following the Trump administration’s extensive revisions to global trade policies. This initiative represents President Donald Trump’s most assertive challenge to the post-World War II global trading framework, causing concern among economists and industry leaders worldwide. The new policy establishes a baseline 10 percent tariff for all US imports while instituting higher, country-specific tariffs targeting approximately 60 nations, including Bangladesh, which previously benefited from an average duty of 15.62 percent on goods entering the US market.

The garment sector in Bangladesh, a crucial industry and significant source of employment, is anticipated to be adversely affected by this policy change. The US has historically represented a primary export market for Bangladeshi garments, and the imposition of substantial tariffs threatens to diminish the sector’s competitiveness. Current data indicates that the US comprises 17-18 percent of Bangladesh’s total global exports, emphasizing the potential impact on the economy.

In 2024, Bangladesh’s exports to the US increased by 1.1 percent year-on-year to $8.4 billion, primarily due to the garment sector, as reported by USTR data. Conversely, imports from the US decreased by 1.5 percent to $2.2 billion, resulting in an expanded trade deficit with the US, totaling $6.2 billion. Notably, Professor Selim Raihan of Dhaka University underscored the widespread implications of these tariff changes, remarking on how this shift could signify a significant transformation away from the Most Favoured Nation principle, a cornerstone of the GATT/WTO framework.

The new reciprocal tariff system introduces differentiated rates for various countries and product categories, leading to a more fragmented and uncertain global trading environment. Professor Raihan noted that this could complicate the identification of exporters benefiting from the US market and contribute to a more unpredictable trade climate. On the eve of the tariffs’ announcement, major retailers such as H&M expressed their apprehensions regarding the potential for elevated consumer prices in the US, highlighting the broader economic repercussions within the domestic market.

Experts agree on the necessity for Bangladesh to adopt a strategic approach in response to these developments. Professor Raihan urged proactive policymaking, emphasizing the importance of revising domestic trade policies, actively engaging in reforming the global trade system, and strengthening trade connections with key partners to bolster the nation’s competitive stance in the changing trade landscape. Additional countries facing significant tariffs include Vietnam at 46 percent, Japan at 24 percent, South Korea at 25 percent, India at 26 percent, Cambodia at 49 percent, and Taiwan at 32 percent.

China, a focal point of Trump’s trade strategy, will encounter a reciprocal tariff of 34 percent, compounded by a 20 percent fentanyl-related duty and separate tariffs relating to solar panels, resulting in an effective rate exceeding 50 percent on numerous Chinese goods. Analysts at Bloomberg Economics caution that these measures could lead to a dramatic 90 percent decline in Chinese exports to the US by 2030. In a 48-minute address in the Rose Garden, Trump reiterated the assertive nature of his policy, denoting the tariff measures as necessary steps to rectify global trade imbalances in favor of the United States.

In conclusion, the introduction of a 37 percent reciprocal tariff by the United States places Bangladesh’s economy under significant duress, particularly affecting its garment industry, which has historically relied on US exports. With the global trading environment set to experience increased unpredictability, proactive strategizing by Bangladesh is imperative to navigate these challenges and adapt to the evolving trade landscape. The broader implications of these tariffs extend well beyond Bangladesh, impacting numerous nations within the global economy.

Original Source: www.thedailystar.net

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